Cigna Group at Barclays Global Healthcare Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Mok - Barclays - Analyst : Great. Let's start with the stop loss. As you just mentioned, you had a bit of a setback on that product in 4Q, attributed some of the pressure to specialty and higher acuity surgeries I think if any company was ahead of the curve on the acceleration of specialty drugs, it was probably Cigna. So taking a step back, why do you think specialty pharmacy has emerged as such a pressure point across the industry now when many of the drugs seemingly causing the pressure drugs like KEYTRUDA, OCREVUS have been around for a number of years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 6:00PM, CI.N - Cigna Group at Barclays Global Healthcare Conference Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Yes. So broadly speaking, the specialty drug wave that we're seeing is right in its infancy actually in terms of where we see the next decade going and it's already a $400 billion addressable market. As we've talked about, for example, at our Investor Day last year, right around this time, and it's been growing high single digits. We expect it to continue growing at that rate from the standpoint of secular growth moving forward. And part of that is drug innovation as you're seeing more and more drugs being approved by the FDA and part of it is also a broader set of indications for the existing drugs. So you referenced KEYTRUDA, OCREVUS, et cetera. Some of those are being now prescribed for additional indications or additional conditions. And on top of that, we're also seeing a dynamic where there are -- there's a greater level of comfort by the prescribers with using specialty drugs as maybe the first place they go as opposed to traditionally starting with a nonspecialty brand. or a different alternative. So all those forces are leading to this wave of specialty drug innovation that's transpiring across the health care system. We benefit from that in our Accredo specialty pharmacy in the specialty and care services platform within Evernorth. Now to the core of your question, this was a pressure point for us within Cigna Healthcare in 2024. So specialty drugs, particularly specialty injectables and infused specialty drugs were a source of pressure for us in 2024. And we view that as a structural shift that's transpired for some of the reasons I made reference to earlier, in terms of the new drugs coming to market, a broader range of indications and the greater level of comfort with prescribers using those as the first-line medication. So for all those reasons, we think there's a structural shift transpiring. Our 2025 outlook reflects that as those our most recent set of pricing assumptions that we put in place for our later renewals in 2025 and 2026. So when you put all those pieces together, difficult 2024 driven by that '25 will also be weighed down a bit as our 2025 outlook reflects. And then we're confident in the ability to recover that margin shortfall over the course of the next two sales cycles.

Question: Andrew Mok - Barclays - Analyst : Right. And this isn't just an issue for Cigna that you're dealing with. This is clearly an issue across the industry. I guess, what are you seeing from a competitive standpoint? What level of prices, price increases, are you able to pass through? And how does that compare to what you might see from your competitors? Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare There's a couple of things here as it relates to the pricing environment. So if you take -- we'll take the commercial employer space broadly. It's a pretty firm market. So we were able to get our 2025 all-in rate increases at a higher level than our 2024 all-in rate increase. for the commercial employer portfolio. So elevated cost trends in '24. The expectations of continued elevated cost trends to 25%, our pricing yields are higher in '25 than they were in '24. Now that's the overall commercial employer portfolio. Then you move to stop-loss specifically, which I think is where your question was headed, Important to keep in mind, our stop-loss portfolio is all integrated clients. So we don't write any stand-alone stop-offs. It's all first dollar relationships self-funded, better than wrapped with a stop loss coverage over the top. Some of that -- most of that is individual stop-loss for an individual climate level. Some of that is aggregate stop-loss. So it's a little

Question: Andrew Mok - Barclays - Analyst : Right. And it sounds like the individual stop-loss book was the primary source of the pressure. Can you share with us the premiums -- what level of premiums you have on the individual side versus the aggregate stop-loss book? Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Yes. So for 2024, the full year, we had about $6.7 billion of premium across the entire stop-loss portfolio. And so that represents about 15% of the Cigna Healthcare premium in 2024. Most of the $6.7 million is an individual stop-loss. So these would be employers who buy protection for individual claimants above a certain threshold. Some might but very low pooling points like $25,000 or $50,000 larger employers might buy much larger pooling points maybe $300,000 or $500,000. And then there's -- the minority of the $6.7 billion is an aggregate stop-loss, where the employer just wants protection against their all-in budget. So they might buy 110% or 120% aggregate stop-loss. But the majority, think of it as maybe

Question: Andrew Mok - Barclays - Analyst : Got it. Okay. And despite that stop loss pressure, I think you've noted that your broader commercial trends, both aggregate, fully insured, have been relatively in line Yes, I think you're expecting growth in your selected middle markets again in 2025. Can you give more color on the group risk competitive landscape and where your products are gaining traction on the selectin middle markets? Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Sure. Sure. Happy to. Important here, our selectin middle market is actually mostly self-funded, mostly ASO. I know inherent in your question were some comments about the group risk market. But the majority of the middle market business is ASO self-funded. And then as you go to the smaller employers, the Select segment, which is under $500, you get more of a mix, more of a balance between the self-funded and the fully insured. So when you think about our expectation of growth in both middle market and Select segment, it's a combination of self-funded and full risk business. And generally speaking, if a self-funded employer particularly at the larger end is making a choice, it's usually not going to be a price-driven choice. Price is a consideration and usually more of a knockout criteria. But typically is other factors and other variables that are driving the final decision on particularly in middle market and larger self-funded business. Now on the risk side to the core of the question, it continues to be a rational and firm market. So those rate increases I made reference to, which for us are higher in '25 than they were in '24. We're still seeing good persistency as it relates to the retention of those employers, even with the more elevated rate increase environment we're seeing here in '25. And the Select segment growth we expect this year, you can think of it as broadly directionally in line with what we've been putting up the last few years as opposed to outsized growth in '25 or I think along the lines of that. So I wouldn't draw any conclusions here about pricing adequacy or anything on that. We feel good about the prices that we have in the market and the employers are choosing us for a wide variety of reasons, which generally prices more of a knockout criteria than the sole factor for why people are choosing us.

Question: Andrew Mok - Barclays - Analyst : Great. And are you able to share anything you're seeing as it relates to effectuated enrollment for the exchange population? Is that playing out relatively in line with expectations? Or are there any observations to call out there? Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare So far for us, I'd say it's in line with expectations. There's a little bit more dust to settle because April, I think, is when the final eligibility verifications will be completed. Also, when you think about our mix, we have a little bit less subsidized silver. We had a little bit less of the CSR silver plans than the market. And so we feel it'll be a little bit less exposed to whatever transpires there. But the outlook we put forth here for '25 contemplates all those moving pieces.

Question: Andrew Mok - Barclays - Analyst : Great. Shifting to biosimilars. Since the launch of the interchangeable biosimilar HUMIRA in July, I think you converted nearly 50% of eligibles onto the biosimilar. Can you talk about your learnings from that and compare that to your strategy for STELARA in 2025? Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Sure. Yes, biosimilars are a very important part of the broader drug innovation that I made reference to earlier in your question about specialty drugs. But more generally, they're a good example of something that is a win-win-win from the standpoint of the patient gets a better net cost, a plan sponsor, whether it's an employer, health plan has a lower price point, and then we -- as the -- essentially the facilitator of all that are able to capture an appropriate return on all that. So it's a win-win-win across all those stakeholders when someone moves from a high-cost brand drug over into a biosimilar. And HUMIRA is a great example of that, where we introduced a $0 patient out-of-pocket through our Accredo subsidiary in the middle of the year. We have 50% uptake on that by the end of the year, to your point, and that number will continue to track higher here in 2025. And and our guidance contemplates that. Now to your point on STELARA, that's another example of a new drug, a drug that will have a new biosimilar available in '25, and so we plan to broadly use the same recipe as we did with HUMIRA, where we'll have a $0 patient out-of-pocket available. We would expect the penetration of that to gradually uptick over the course of the year. It's important to keep in mind here, things like the interchangeability of the drug matters, having different dosage levels can matter and whether someone is a new patient or an existing patient can matter. All those things influence the rate and pace of the adoption of the biosimilars, but this is an important lever for the U.S. health care system, and it's a driver of our long-term 5% to 8% average annual growth rate of income in Evernorth.

Question: Andrew Mok - Barclays - Analyst : When we think about the guardrails that you mentioned, things like maybe BMI, do you find yourself needing to revise those higher to combat the high usage and adoption of the drugs as we look at '24 to '25 to '26. Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare We have not because we've let the clinical guidelines dictate what's appropriate here. So there has been high growth rates in GLP-1s for the past few years. When you think about '23 was a high trend year, '24 was the high trend year '25, we expect to be another high trend year, albeit at a decelerating rate, but still at a high rate of growth in GLP-1 scripts. But ultimately, we let clinical guidelines dictate that as opposed to financial considerations.

Question: Andrew Mok - Barclays - Analyst : Great. And with the fourth quarter earnings, you guys also announced an incremental $150 million of investments across the health care segment and Ever North -- what exactly do those investments entail? And is that a recurring expense item or kind of a onetime investment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 6:00PM, CI.N - Cigna Group at Barclays Global Healthcare Conference Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Yes. So as we teed this up alongside our fourth quarter earnings release, importantly, we felt like we had an obligation here to step into a little bit of the void in the health care system in terms of consumers, patients that are asking for the health care system to work better, we decided as a company to step into that with these commitments that we outlined as well as putting our money where our mouth is, which led to the $150 million of initiative investment that we earmarked here for '25. You can think of that as divided between Cigna Healthcare and Evernorth. And you can think of that as patient-facing and provider-facing -- some of that will be kind of run ratable from the standpoint of some of its head count. So as an example, we're adding advocates and navigators to help with some of the most clinically complex customers and patients that we serve. So that type of thing will be in our baseline. There are other things that are more onetime in nature as it relates to technology investments. So for example, in Cigna Healthcare, we're developing a prior authorization tracker. So that as a customer, you can understand where your prior authorization is in process if you think about package delivery or pizza deliveries as an analog to that. So that's the type of thing that will be more one-off spend. And then in Evernorth, there's investments that we're making in our patient level drug reporting, so you'll get a personalized statement at the end of the year, which will be available digitally. That's the type of thing that will be mostly nonrecurring in nature, but you can think of a blend of some recurring and some nonrecurring spend in that $150 million.

Question: Andrew Mok - Barclays - Analyst : Great. With that, we're out of time. Brian, thank you so much for joining us today, and please enjoy the rest of the conference. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 6:00PM, CI.N - Cigna Group at Barclays Global Healthcare Conference Brian Evanko - Cigna Group - Chief Financial Officer, Executive Vice President, President and Chief Executive Office - Cigna Healthcare Thank you, Andrew. I appreciate it.